Mises Wire

Big Pharma Makes Drugs that Please Regulators, Not Customers

The Washington Post and “60 Minutes” have just peeled back another sordid layer in the War on Drug by exposing Big Pharma’s role in expanding the Opiod Crisis that has resulted in more than 30,000 deaths per year.

All the disgusting details can be found here, but it is really a straight forward case of legal bribery and corruption in the market for legal opiates — the driving force in this crisis as doctors continue to turn untold thousands of innocent people into opiate addicts.

Opiate medicines have been a Godsend to humanity, but it comes also with scourge of addiction, dependence, and overdose deaths. The Harrison Narcotics Act of 1914 made the situation worse thanks to the meddling of federal bureaucrats who turned regulation and oversight into prohibition.

One of the most demaging side effects of federal meddling in drug markets, however, has been the Opiod Crisis. I have detailed here and here the primary cause as Big Pharma bribing the board responsible for setting pain maintenance guidelines and the resulting explosion of prescriptions for Opiod drugs by doctors.

The newest wrinkle uncovered shows that pharmaceutical drug distributors have paid off select members of Congress to rewrite the enforcement guidelines for the Drug Enforcement Agency (DEA). A good case in point is Representative Tom Marino who withdrew his name from consideration as President Trump’s Drug Czar.

The new guidelines and their enforcement have effectively neutered any restraint on pharmaceutical producers and distributors. They can sell untold millions of these pills to pharmacies and pain clinics without any constraints. The additional cost of producing these heroin-like pills is virtually zero.

Is Bribery and Corruption a Good Thing?

Normally, bribery and corruption of public officials is a good thing because it allows more producers and more consumers to obtain gains from trade from each other. Such is not the case with prescription opiates in this environment.

The problem here is that there is not a functioning marketplace at all when it comes to distribution of prescription opiates. It is a government-granted monopoly in every respect. The products we are examining have not passed the market test and the producers are effectively protected by the government against torts, liability, and claims of misrepresentation.

In addition, pharmaceutical drugs have been approved by the Food and Drug Administration (FDA) and, essentially, the FDA grants monopolies to drug companies for their patented drugs and gives them an FDA seal of approval that the drugs are safe and effective.

Then another government-created monopoly, the American Medical Association (AMA) and its doctor-members have the monopoly on writing the necessary prescriptions to obtain drugs from yet another monopoly the pharmacists.

A doctor’s prescription is essentially another AMA seal of approval that the vast majority of people do not even question or even concern themselves with what they are taking. All of these monopolies are usually protected when consumers die as long as it happened when all the monopoly rules are followed.

Thus, with these products, like Oxycontin and Vicodin, there is no attempt to pass the "market test" by seeking to primarily please consumers. Instead, consumers end up being an afterthought after producers of the drug have catered to the needs and desires of countless regulatory agencies. In real free market competition, an entrepreneur of dangerous products has to assure consumers that the products are safe and effective enough to use compared to the alternatives.

Opiates in Unhampered Markets

In other words, pain medications do not have to be perfectly safe and perfectly effective to be the best alternative choice for people who suffer with pain. However, they have to be reasonably safe and effective. The high potential for addiction, harm to health, and even death would be a “competitive disadvantage” in a real free market.

Just the opposite is the case here. The government has created and overseen the creation of every step in the development of this crisis. The fact that crony capitalists have taken advantage of the situation should not be a surprise, especially when it is the only way to legally participate in the pharmaceuticals "market."

Mark Thornton is a Senior Fellow at the Mises Institute and the book review editor of the Quarterly Journal of Austrian Economics. He has authored seven books and is a frequent guest on national radio shows.